The fourth transformation of Singapore’s industrial relations Chris Leggett University of South Australia ABSTRACT Three transformations of Singapore’s industrial relations have been discernible since1959, when the Peoples Action Party (PAP) was elected into office, and 1986. There was an interregnum between 1987 and 1997, when Singapore experienced a long decade of economic growth and such modifications to its industrial relations system as were made, were not transformational. The Asian economic crisis of 1997 triggered a fourth transformation ― one that has implications for the broader debate about the future of work in industrial market economies ― under the official rubric of ‘Manpower Planning’. The aim of this paper is to apply a strategic choice model to explain this latest transformation. The paper concludes that a strategic choice approach is an appropriate heuristic for the transformation of Singapore’s industrial relations system. Introduction The strategic choice model of industrial relations was developed by Kochan et al. (1986) to explain the transformation of American industrial relations that they claimed the systems model (Dunlop, 1958) was unable to do. Since 1986, their approach to industrial relations has been applied in other parts of the world. Methodologically, it presupposes significant knowledge organised according to a systems schema. Therefore, observations of industrial relations in Singapore, with its colonial and post-colonial political history, presuppose that the facts acquired by observation are knowledge dependent. This is not a problem so long as one does not require ‘that the confirmation of facts relevant to some body of knowledge should precede the acquisition of any knowledge’ (Chalmers, 1999, p. 14). Consequently, we use the strategic choice model here to explain the latest transformation of Singapore’s industrial relations. We conclude that a strategic choice approach is an appropriate heuristic for the transformation of Singapore’s industrial relations system and note that the transformation itself has implications for the debate about the future of work that engages industrial relations academics such as James et al. (1997) in industrialised market economies. The strategic choice model Although sometimes represented as a paradigm shift (Chelius and Dworkin, 1990b, pp. 2, 14-16), the strategic choice model qualifies and builds on systems theory as applied from Parsons (1951) to industrial relations by Dunlop (1958). Kochan et al. (1986, p. 11) refer to their approach as one that ‘draws from the rapidly growing theoretical paradigm that integrates the traditional theories of industrial relations systems with the literature on corporate strategy, structure and decision making’ (author’s emphasis). Their strategic choice approach embodies a general framework for analysis of industrial relations issues, which includes participants’ strategic choices, and a three-tier institutional map of industrial relations institutions. The leader and strategist in transforming Singapore’s industrial relations has been the People’s Action Party (PAP) Government, which includes cadre trade unionists (Leggett, 1993, Chew and Chew, 2003), whereas Kochan et al.’s analysis of the transformation of American industrial relations attributes these roles to management. It may be that to make it relevant elsewhere the modifications to their strategic choice approach, upon which Koch et al. speculate, could include a relocation of the strategic initiative for change., to the chaebol in South Korea for example (Kwon, 1997; Kwon and Leggett, 1994; Kwon and O’Donnel, 1999). 348 AIRAANZ 2005 Transformations of Singapore’s industrial relations to 1986 Four sequential transformations of Singapore’s industrial relations are identified (Table 1). TABLE 1 Strategic initiative, strategic choice and the transformations of Singapore’s industrial relations Colonial Administration to 1960 Regulated Pluralism to 1968 Corporatism to 1979 Corporate Paternalism to 1997 Manpower Planning ongoing Strategic initiatives taken by political elites Colonial government PAP Government PAP Government PAP Government PAP Government The unsuccessful suppression of politicised to the promotion of economistic trade unionism regulated by union registration To regulate industrial relations and employment terms and conditions by law. To restructure the economy through wage reform To respond to globalisation by transforming industrial relations into strategic HRM, called ‘manpower planning’ To cultivate politically loyal trade unionism. To leave rival unions to decline To place legal constraints on collective bargaining,. To incorporate trade unions into the PAP-NTUC symbiosis. To involve employers with the PAP-NTUC through NWC wage fixing. To promote technocrats as union leaders. To restructure unions and redefine trade unionism. To facilitate flexible HRM Strategic choices made by trade union leader Fronts and Federations Fronts and Federations NTUC NTUC NTUC Challenge to authority through labour unrest (Leftists) To identify with Barisan Socialis (SATU) or with the PAP (NTUC). To abandon confrontational bargaining for cooperatives and social welfare provision To strengthen the NTUC leadership with technocrats To engage with MOM and SNEF to increase workforce mobility and promote lifelong learning Confrontational bargaining (Moderates) To restructure unions along industry and enterprise lines Strategic choices made by employers Government as Employer and Employers Government as Employer, NEC and SEF Government as Employer, NEC and SEF Government as Employer, and SNEF Government as Employer and SNEF Grudging compliance with the promotion of trade unionism To comply with the legal regulation of industrial relations and dispute settlement To participate in centralised wagefixing through the NWC To recommend and adopt some Japanese employment relations practices To engage with MOM and NTUC to increase workforce flexibility and mobility They are: from colonial administration to regulated pluralism, 1959-1967; from regulated pluralism to corporatism, 1968-1978; from corporatism to ‘corporate paternalism’, 1979-1986, anticipated by Deyo (1981, pp. 95-107); a fourth transformation, referred to in Singapore as The fourth transformation of Singapore’s industrial relations 349 ‘Manpower Planning’, begun in 1998 but not yet completed. Also discernible is an interregnum of consolidation and minor modification from 1987 to 1997. From colonial administration to regulated pluralism, 1959-1967 The strategic initiative for this first transformation of Singapore’s industrial relations lay with the PAP Government that came to office in 1959, led by Lee Kuan Yew. With intent to industrialise Singapore, it passed the Industrial Relations Ordinance 1960 to regulate collective bargaining and dispute settlement through conciliation and judicial arbitration. Its ‘moderates’ used their office and the Internal Security Ordinance 1948 to demoralise their ‘Leftist’ colleagues and promote a National Trades Union Congress (NTUC). A former ‘Leftist’, C. V. Devan Nair, brought trade unionists under the NTUC umbrella and then the NTUC into a symbiosis with the PAP to achieve the regulated stability that had eluded the colonial administration (Media Masters, 2003). 1960 to 1967 saw the end of politicised labour and a decline in adversarial industrial relations, but the Ministry of Labour’s conciliation caseload remained high (Ministry of Labour, Annual Report, 1960-1967). The Trades Disputes Act 1941 and the Criminal Law (Temporary Provisions) Act 1955 had already limited the capacity of unions to take industrial action in essential services, made politically motivated strikes illegal and banned secondary picketing when the President of the Public Daily Rated Employees Unions Federation (PDREUF) had, in December 1966, called for a strike in support of a wage demand, a strike that was made unlawful by virtue of the Government referring the dispute to the Industrial Arbitration Court (IAC). An affiliate, the Public Daily Rated Cleansing Workers’ Union (PDRCWU) went on unofficial strike in January 1967 and both the PDREUF and the PDRCWU were deregistered two months later. The Government banned all strikes in certain essential services and required separate unions for each statutory board. The strike was a ‘turning point in Singapore’s industrial history’ and prepared the workers for the changes the Government was planning to make to the labour laws. (Lee, 2000, pp. 106-107). From regulated pluralism to corporatism The effects on the scope and content of collective bargaining and on the role of trade unions of the Employment Act 1968 and the Industrial Relations (Amendment) Act 1968 were in many ways greater than those of Singapore’s transition to self-government and independence. The immediate purpose of the legislation was to counter the loss of jobs anticipated as a result of the withdrawal of British military bases from Singapore. The Industrial Relations (Amendment) Act 1968 extended the duration of collective agreements and made it an offence for a trade union to raise for collective bargaining matters of management prerogative. The Employment Act 1968 set out the minimum terms and conditions of employment for the workforce and, for the bulk of the manual workforce, the Industrial Relations (Amendment) Act 1968 confined these terms and conditions of service in a collective agreement to those prescribed as minima under the Employment Act (Leggett et al., 1983, p. 57). As a result the number of disputes and working days lost fell, but so did trade union membership (Ministry of Labour, Annual Report, 1968-1971). If the NTUC was to play a significant part in the Government’s human resource strategy for economic development, it had to be revitalised. Revitalisation, it was advised by the PAP leaders and announced by NTUC senior officers at a seminar Why Labour Must Go Modern in 1969, would be by establishing consumer cooperatives and providing welfare services (National Trades Union Congress, 1970). The direction of the transformation in this period was sustained by the passing of the National Wages Council Act 1972 and strengthened by the authority of the wage guidelines of the resulting National Wages Council (NWC) (Oehlers, 1991, p. 287; Tan, 2004, p. 222). It also may have contributed to the turnaround in 1973 of a declining union membership (Conversation with the former NWC Chairman, 30 October 2003). As with the first transformation this one included a significant strike - at Metal Box in 1977 (Deyo, 1981, p.50) - which, as it was the last strike in Singapore carried out without the tacit consent of the Government, might be seen as another turning point in the history of Singapore’s industrial relations. 350 AIRAANZ 2005 By 1979, Singapore’s industrial relations had been transformed from a system of a regulated plurality into a system in which trade unions, by being a partner in government, had their activities were constrained for the sake of economic development; and, in 1979, the Singapore Government was ready to restructure the economy and encourage another transformation of industrial relations (Leggett, 1988). From corporatism to corporate paternalism Qualitative change to the NTUC leadership, trade union restructuring and redefinition, and wage reform were the key changes that made up the third transformation of Singapore’s industrial relations. A merger of the two major employers’ associations tidied up the national tripartite structure. The strategic initiative remained with the PAP Government but the transitions were not always enthusiastically embraced: there was a work-to-rule by aircrew of Singapore’s flag-carrier airline (Leggett, 1984) and passive resistance to trade union restructuring. Workers were scolded for inappropriate work attitudes and a recession led to a re-think about the pace of change. As with the first two transformations, this one ended with a strike, paradoxically one sanctioned by the Minister for Labour (Asiaweek 10 March 2000). The induction into the NTUC of young technocrats got off to an unfortunate start when the Prime Minister effectively dismissed former naval architect, Lim Chee Onn, from the NTUC Secretary-Generalship (Straits Times, 13 April 1983) and concessions had to be made to ‘grass roots’ leaders in the NTUC. Lim’s successor, Labour Minister Ong Teng Cheong, made clear his unitarist credentials by declaring that even resort to conciliation and arbitration was ‘a sad state of affairs’ (National Trades Union Congress, 1984, p. 1). By the late 1970s, economic success had brought Singapore a tight labor market and anxiety about being caught in the low wage trap. To avoid the trap it would take an institutional approach of greater sophistication than hitherto. Thus, from 1979 to 1981 the unanimous annual recommendations of the authoritative NWC substantially boosted wage levels in Singapore with the deliberate intention of shifting capital-to-labour ratios to slow employment growth and raise productivity. It would seem that the high wage policy had the intended effect on productivity as there was a reported increase over the 1970s of an annual growth rate of from two-to-three percent, to four percent in the early 1980s. The possible inflationary effect of the wage increases was offset by increases in the employers’ and employees’ compulsory contributions to the statemanaged Central Provident Fund (CPF), which had become a more complex instrument of economic and social policy under the sophisticated corporatism of the 1980s. In hindsight the policy was premature, and in 1986, when the Singapore economy was in recession, had to be corrected (National Wages Council, 1986; Mauzy and Milne, 2002, p. 10). Partly to avoid concentrations of power, in 1979 the NTUC began to restructure omnibus unions into industry-wide ones but it was a commitment to the emulation of Japanese industrial relations that caused the restructuring to be taken further by the promotion of house unions ‘better able to promote the bond and cooperation between the employee and the company’ (The Straits Times, 27 July 1984). Union restructuring provoked some resistance from some trade unionists (Leggett, 1988, p. 249), but the redefinition of trade unions by substituting the ‘purposes’ of the promotion of ‘good’ industrial relations, the improvement of working conditions and the achievement of productivity for the confrontational ‘objects’ of the original British legislation completed the transformation of their experiences of trade unionism (Leggett, 1993, p.242). The changes that constituted the fourth transformation of Singapore’s industrial relations, although foreshadowed, did not begin until after the 1997 Asian economic crisis and remain in progress in 2004. Meanwhile, in the long decade that followed the industrial relations issues that presented themselves, although important, were not in themselves transformational.). The decade of growth, 1987-1997 In Singapore, 1987-1997 has been represented as between crises and labeled the ‘decade of growth’ (Ee, 2001, p. 87). Following the 1985-1986 recession an Economic Committee made recommendations on wages (Ministry of Trade and Industry, 1986). Wage rigidities, which had partly resulted from past NWC recommendations, were to be removed; wage levels were to reflect job worth and employee productivity, and companies were to use the variable components in Chris Leggett 351 pay as incentives (Tan, 2004, p. 223). In spite of the economic recovery the NTUC continued in 1987 to urge wage restraint and wage reform. This was consistent with NWC recommendations (Ministry of Labour, 1987), to which the NTUC was a party, that, in line with the Economic Committee’s recommendations that wages should lag productivity growth and that as much as possible of total wage increases should be in an annual variable component (AVC). The employers’ contribution to the CPF, which had been cut from 25 to 10 percent of total wages in 1986, was increased over the decade to 20 percent, and the employees’ contribution, which had remained at 25 percent, was reduced by 5 percentage points over the decade to make a combined contribution of 40 percent by 1991, an achievement maintained until the decade’s end (Ministry of Labour, 1987-1997). Singapore’s fourth industrial relations transformation The changes that constitute the fourth transformation of Singapore’s industrial relations, although foreshadowed, did not begin until after the 1997 Asian economic crisis and remain in progress in 2004. An account of Singapore’s fourth transformation may be seen as relevant to the ‘major debate in industrial relations research over the past decade…over whether or not some fundamental transformation is occurring in the industrial relations systems of different countries in response to the internationalisation of markets, technological innovations, and increased workforce diversity’ (Locke et al., 1995, p.139). Because of its requirement for workforce flexibility and because of the new behavioural and attitudinal demands it makes on Singapore’s employees as a consequence, the fourth transformation, has implications for the broader study of the future of work. In 1998, the Government transformed Singapore’s Ministry of Labour into the Ministry of Manpower (MOM). MOM’s mission was to develop a globally competitive workforce and foster a highly favourable workplace to achieve sustainable economic growth for the well being of Singaporeans, reflecting in Singapore the worldwide development of industrialised economies adjusting to the imperatives of globalisation and technological advance. The Singapore authorities’ response to the 1997 Asian financial crisis did not of itself constitute the beginnings of the fourth transformation of industrial relations. The immediate response was similar to that triggered by the 1985-1986 financial crisis: a raft of cost-cutting measures to sustain the competitiveness of local invested corporations (Ministry of Trade and Industry, 1986, 1998; Tan, 2004, pp. 296-320). Singapore economists reported the immediate measures as ones ‘that could be taken to reduce costs in order to save jobs, as well as on skills upgrading to ensure life-long employability’ (Chew and Chew, 2000, p. 11). On the labor front it was thought sufficient to reduce the variable components of wages that had been introduced in the third industrial relations transformation but this proved not to be so and employers’ contributions to the CPF were cut (Tan, 2004, pp. 301 and 303). A broader and longer term strategy involving the institutions of industrial relations and thereby a transformation of the industrial relations system was undertaken under the rubric of ‘Manpower Planning’. ‘Manpower Planning’ has been adopted as the tripartite label for a national response ― made after consultation with eminent management and industrial relations academics with global reputations ― to the global forces that are seen to require a shift in the way work is organised and done and in the way working life is lived. In particular, in Singapore, it is represented as an investment in people in order to transit to a knowledge economy (Ministry of Manpower, 1999, p. 7). The government’s manpower planning strategy The 1999 Ministry of Manpower’s blueprint, Manpower 21, identified six strategies with accompanying recommendations on how to pursue them and named the leading partners. The six strategies are: (1) the integration of manpower planning; (2) the development of lifelong learning for lifelong employability; (3) the augmentation of the talent pool; (4) the transformation of the work environment; (5) the development of a vibrant manpower industry; (6) the redefinition of partnerships. Of its 41 recommendations, 33 require MOM to take the lead, and one each the Ministries of Trade and Industry, Finance, Education and Environment but involving the Ministry of Manpower. The lead partners with MOM specifically include the NTUC and the SNEF for strategies (2), (4) and (6). 352 AIRAANZ 2005 For lifelong learning and employability they are required to ‘Continue to provide support for workforce development programs targeted at older and less educated workers, and for developing manpower for strategic industries’. Their responsibilities within the transformation of the work environment are to ‘Promote best HR practices by developing national recognition awards for companies with exemplary HR practices and organising HR conferences’. The roles of the SNEF and NTUC together with that of MOM in redefining partnerships is to organise an annual Manpower Summit and ‘Introduce a Labour Management Partnership Programme to support joint labour-management initiatives’ (Ministry of Manpower, 1999, pp. 52-58). Apart from the involvement of these industrial relations institutions in manpower planning, there is little in the recommendations that relates to the industrial relations of the past except for MOMs responsibilities for occupational, health and safety, workmen’s compensation and amendments to the Employment Act 1968 for greater flexibility. The NTUC’s strategy for manpower planning The NTUC’s blueprint, NTUC 21 (National Trades Union Congress, 1997) was produced two years before MOM’s Manpower 21. It identified five pillars for the labour movement in the 21st century: ‘Enhance Employability for Life’; ‘Strengthen Competitiveness’; ‘Build Healthy Body, Healthy Mind’; ‘CareMore’; ‘Develop a Stronger Labour Movement’ (National Trades Union Congress, 1997). A concern here, however, expressed as an imperative in Manpower 21, was the shrinking union membership base affecting the NTUC’s strength as a ‘social partner’. Thus Manpower 21 exhorted the ‘tripartite partners’ to ‘jointly review these issues and study how union membership and leadership could be strengthened so that unions can continue to be an effective partner in Singapore’s tripartite framework (Ministry of Manpower, 1999, p. 48). Membership growth was the fourth of eight NTUC key programs for adapting to the new work environment (see below) and there has been a continuous growth in absolute trade union membership since 1997. In the last few years this has begun to outstrip employment growth, with density in 2003 passing 20 percent. Since 1997 there have been some changes in the structure of the NTUC ¯ mainly towards industry-wide unions and away from the once preferred house unions ¯ by amalgamation and merger. Only a few unions chose not to affiliate with the NTUC and they include those representing airline pilots, some catering workers, motor workshops employees and print and media employees. Anticipating a state of ‘constant job churn’, as well as aiming to equip workers with medical benefits, union memberships and individual training accounts that are portable between employers, the NTUC has put in place eight key programs (NTUC, 2001, pp. 3-6). They deal with community development, industrial relations for competitiveness, leadership development, membership growth, employment and training, productivity push, skills upgrading, and workplace health. They may be seen as: (1) multi functional — the functions of social development, employment management, union agency maintenance and development, and human resource development; (2) operating at different levels — society, work community and workplace; (3) integrating the functions of maintenance, management and development and the different levels with and within the labor movement. When configured in this way they constitute a transformation of the labor movement commensurate with the transformation of Singapore’s industrial relations system. The employers’ role in manpower planning While the Chambers of Commerce and the Singapore Manufacturers’ Federation (SMF) have representation on the NWC, the Singapore National Employers’ Federation (SNEF) is the key representive of employers in the national Manpower Planning strategic initiative. Complementing MANPOWER 21 and NTUC 21, SNEF 21 (Singapore National Employers’ Federation, 1997) SNEF listed the following strategies for the new millennium: pursue productivity, stay competitive, win workers, create more high value-added jobs, cultivate corporate citizenship (Tan, 2004, p.119). The issues considered by the SNEF in 2000-2001 were the NWC recommendations, the representation of executives in rank-and-file unions, portable medical benefits, the monthly variable component, and retrenchment benefit guidelines. The SNEF’s Secretariat comprises salaried appointees and in 2001 included two secondments from MOM. The role of the SNEF The fourth transformation of Singapore’s industrial relations 353 in industrial relations is largely determined by its commitment to Singapore’s tripartism. Thus, the issues that are the concern to MOM and the NTUC are much the same as those that are the concern of the SNEF, but with the SNEF’s greater concentration on labor costs, especially the NWC’s annual wage guidelines, the level of employers’ CPF contributions and the retirement age, which was again increased (to 62 years) in 1999 (Singapore National Employers’ Federation, 2001). The SNEF’s activities that reflect and complement the NTUC’s and MOM’s manpower planning strategies include labour and salary surveys and the provision of a range of courses in management, administration and human relations skills. Its Diploma in Management specialises in Industrial Relations and Human Resource Management. As well as its representation on the NWC and the CPF Board, the SNEF is represented on a range of community bodies. Globalisation, increased competition and the increasing acceptance of the doctrine of economic rationalism, have created a whole new set of contingencies for management in Singapore, in particular for those managers that were once safely within the public sector. Increased exposure to the business environment has required them to hone their management skills, set strategic directions and be more responsive to markets. Not excluded from the Manpower Planning strategy imperative is the management of human resources, represented professionally in Singapore by the Singapore Human Resource Institute (SHRI) and to some extent by the Singapore Institute of Management (SIM), especially by its extensive management education programmes. Employers and managers are highly institutionalised in professional and developmental organisations in Singapore and where not officially represented are regularly consulted by the Government and employers. The NWC and a competitive base wage system The NWC had been urging an increase in the proportion of wage increases being paid as a variable component when, in 2003, the Government-commissioned a report from a ‘Tripartite Task Force’, on wage restructuring (Ministry of Manpower, 2004). Its recommended a Competitive Base Wage System and urged a move away from a seniority based wages with a 70 percent basic wage, a 20 percent annual variable component (AVC) and a 10 percent monthly variable component (MVC) for rank-and-file employees; and 40 percent and 50 percent variable components for middle and top managements, respectively. Discussion Singapore’s industrial relations transformations have been in response to the state of the world economy, although partly precipitated by immediate local and regional crises. The first was a result of commitment to industrialisation by a Government released from the constraints of colonial administration. The second was the result of pre-empting the employment effect of the withdrawal of the British military base from Singapore. The third was due to a realisation that if the standard of living of Singaporeans were to continue to rise, MNC investment had to shift to high technology, high value-added production. These three transformations involved institutional changes that have determined the infrastructural arrangements for the fourth. Tripartism was organised in a range of public sector institutions, from statutory boards to industrial arbitration. While these arrangements remain, the transition from a corporatist to a corporate emphasis has added another dimension to tripartism. This corporate emphasis is particularly apparent in Manpower 21 with its different combinations of participants for achieving each of its forty odd recommendations Of the three parties, the strategic initiative remains with the Government although the NTUC and SNEF blueprints for the 21st Century predated that of MOM. Because of the strength and seniority of the PAP-NTUC symbiosis, it can be assumed the NTUC’s program had the de facto endorsement of the Government. 354 AIRAANZ 2005 Summary Following the quick recovery from its 1985-1986 economic crisis and during a long decade of economic growth, the industrial relations system of Singapore that emerged from the third transformation - from corporatism to corporate paternalism - was consolidated and refined rather than transformed. A further transformation, this time triggered by the Asian financial crisis of late 1997 continues to this day (2004) and appears to be, in a concentrated form, what many of the older industrialised countries have been experiencing for a couple of decades or so, or longer in the USA according to Kochan et al. (1986), a comparison with which could be justified by the concertina effect of ‘late, late’ industrialisation (Dore, 1979). Heralded as ‘Manpower Planning’ it aims at achieving workforce flexibility and mobility, as opposed to the discipline and diligence of the first and second transformations and the company loyalty and stable employment of the third, to ensure employability as global competition intensifies and technologies advance. The strategic initiative for transformation lies with the Government, but is reinforced through the programs led by MOM and shared with the NTUC and, to a lesser extent, the SNEF, and implemented through the complex of corporatist institutions established and developed in the earlier transformations of Singapore’s industrial relations. Conclusions While the original strategic choice model was predicated on the strategic initiatives of management, the strategic initiatives of Government in the Singapore case for four distinctive transformations has largely determines the strategic choices of the other two ‘actors’. With regard to levels of industrial relations activity, the legitimacy conferred by tripartism has ensured that the required responses permeate to all levels, from senior management to the shop floor, particularly with wages policies. 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